Friday, July 31, 2009

Clunk! The sound a billion dollars makes

In my youth a guy or gal would buy a new car with a three year loan. In the period between one day and six months after the final loan payment said vehicle would officially become a beater, to wit: a clunker. It was easy to tell it was a clunker because all of the metal below the glassline would rust away and be left in piles on the driveway. We used to think this was kind of a problem and longed for the day when our Kaiser, Ford, Chevy, or Plymouth would last forever. Or at least four years. It was during the Cold War and four years might be longer than forever, by the way.

In the import car era the vehicles last much longer. Market competition did that-- not government edicts. Loans are typically five years in length and cars easily hold up for ten years. Are we happy now?
Cars apparently are too well made now. When people got worried about their financial futures last year they decided they could hang on to their older vehicles for a bit longer and new car sales fell to levels most observers believe is unsustainable in the long term. Enter Congress to solve this "problem" of cars being too durable. Cash For Clunkers was designed to take tax payer money and buy up $1 Billion worth of America's used cars. Those clunkers were, by law, destined to be crushed and shredded. Many of these vehicles are quite serviceable-- in fact, they had to be running and licensed/ insured to even qualify for the $4,500 government voucher. In a free marketplace without this government intrusion the cars and trucks would have been traded in for their market value at some point and re-sold to people with less ability or willingness to pay for a more expensive vehicle. At some future date they would have been salvaged for their reliable parts.

But in "DC World" where One Trillion Dollars is flipped like a nickel, a used car buyout costing $1 Billion isn't the end of the world. Certainly it has a better payoff than the "stimulus" pork project dollar for dollar. Still... can you imagine the Founders being told that somewhere in the US Constitution there was found a provision allowing the federal government levying taxes on the public in order to buy up used carriages and older horses so that the horse and carriage industry might be invigorated?

Of course, like the days of rusted out clunkers, those days where horsebleep was called horsebleep are way behind us. Cash For Clunkers shot through the billski in less than a week and is seen as a huge success that should be expanded.
Is there any limit to how DC will tinker in the once free market. Is there even a political party with the will to stop this craziness?